In BASE analysis for retained earnings, which operation corresponds to the 'Add' line?

In BASE analysis for retained earnings, which operation corresponds to the 'Add' line?

• A. Net income.
• B. Dividends paid.
• C. Capital contributions.
• D. Beginning retained earnings.

Answer: (A)

Net income is the amount that adds to retained earnings. In BASE analysis, the Add line captures items that increase retained earnings, and net income for the period increases the accumulated profits carried within that account. Dividends paid reduce retained earnings, so they go on the Subtractions line. Beginning retained earnings is simply the starting balance carried forward, not an addition. Capital contributions affect contributed capital, not retained earnings, so they don’t belong on the Add line. Thus, the Add line corresponds to net income.

Net income is the amount that adds to retained earnings. In BASE analysis, the Add line captures items that increase retained earnings, and net income for the period increases the accumulated profits carried within that account. Dividends paid reduce retained earnings, so they go on the Subtractions line. Beginning retained earnings is simply the starting balance carried forward, not an addition. Capital contributions affect contributed capital, not retained earnings, so they don’t belong on the Add line. Thus, the Add line corresponds to net income.